TMI Blog2021 (12) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter to the DVO u/s. 56(2)(vii) of the Act which is totally misconceived - in our opinion, the addition made by the AO is totally unjustified and cannot be sustained - revenue cannot be allowed a second innings by sending the matter back to the AO to refer the matter to the DVO to ascertain the correct fair market value of the property purchased by the assessee, when assessee all along disputed the valuation of property adopted by the AO for the purpose of registration of the same and the AO failed to find out the correct value of the property both at the assessment stage as well as at the first appellate stage. This was considered by the Agra Bench of the Tribunal in the case of Hari Om Garg [ 2019 (5) TMI 1834 - ITAT AGRA] wherein a view was taken that the Department cannot be allowed a second inning by sending the matter back to the Assessing Officer enabling the revenue to fill the lacunae and shortcomings and further putting the assessee to face a re-trail for no fault of him and to prove before the Assessing Officer that the sale consideration was the fair market value of the property purchased by him - We delete the addition made by the AO u/s. 56(2)(vii)(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bona fide error committed by the auditor for which no importance could be given. Appeal of assessee allowed. - ITA No.227/Bang/2020 - - - Dated:- 29-11-2021 - Shri Chandra Poojari, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Smt. Suman Lunkar, CA For the Respondent : Shri Sankar Ganesh, Jt.CIT(DR)(ITAT), Bengaluru. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order dated 12.12.2019 of the CIT(Appeals), Bengaluru-10, Bengaluru for the assessment year 2014-15. The assessee has raised the following grounds:- 1. The order passed by the learned CIT(A) to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. The learned CIT(A) has erred in upholding the addition of ₹ 38,23,500 made by the learned Income Tax Officer, Ward 7(2)(1), Bangalore being 50 percent of the difference between the stamp duty guideline value and purchase consideration i.e. 50percent of (1,76,47,000 minus 1,00,00,000) under section 56(2)(vii)(b). The additions being bad in law, is liable to be deleted. 2.1 The learned CIT(A) has erred in not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property in question on the date of transaction was less than the stamp duty valuation, was submitted along with the written submissions filed before CIT(A). The CIT(A) having passed the order without considering the valuation report filed along with the written submissions is bad in law and liable to be quashed. 2.7 On the basis of facts and circumstances of the case and law applicable, the addition of ₹ 38,23,500 made u/s 56(2)(vii)(b) is bad in law and is liable to be deleted. 3. The learned CIT(A) has erred in upholding the addition of ₹ 2,00,23,125made by the learned Income Tax Officer, Ward 7(2)(1), Bangalore by not granting the exemption of under section 54F as claimed by the appellant. 3.1 The learned CIT(A) has erred in relying on the remand report of the learned Income Tax Officer, Ward 7(2)(1), Bangalore and thereby concluding that the appellant has invested in 4 residential properties and does not qualify for exemption u/s 54F. The CIT(A) order relying on the erroneous remand report of the assessing officer is bad in law and liable to be quashed. 3.2 The learned Income Tax Officer, Ward 7(2)(1), Bangalore and the CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,09,364 and ₹ 18,04,506 respectively. On facts and in the circumstances of the case and law applicable, interest under section 234A and 234B is not leviable. The appellant denies its liability to pay interest under section 234A and 234B of the Act. 7. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed under section 250, to the extent prejudicial to the appellant, be quashed or in the alternative i) the addition of ₹ 38,23,500 made u/s 56(2)(vii)(b) is bad in law and is liable to be deleted. ii) the exemption of ₹ 2,00,23,125 to be allowed u/s 54F as claimed by the appellant The appellant prays accordingly. 2. The first issue for our consideration is with regard to addition of ₹ 38,23,500 made u/s. 56(2)(vii) of the Income-tax Act, 1961 [ the Act ]. The facts are that the assessee along with his wife Smt. N.S. Rathna had jointly purchased a commercial property situated at No 507 to 514, 2nd Main Road, Malleshwaram, Bangalore, measuring around 1500 square feet for a consideration of ₹ 1,00,00,000. For the purposes of stamp duty the Sub- Registrar valued the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of transfer, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause ( i ) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under subsection (1) of section 16A of that Act. 6. During the assessment proceedings, the assessee vide letter dated 08-11-2016 submitted detailed reasons as to why the value as per stamp valuation authority was higher than the fair value of the property purchased. As the assessee had claimed that that the value assessed by stamp valuation authority exceeded fair market value of property, it was submitted that the AO ought to have referred the matter to valuation officer instead of deeming value adopted by stamp valuation authority as full value of consideration as held in Sarwan Kumar v ITO (2014) 150 ITD 289 (Delhi)(Trib) . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter to the valuation officer. There is no requirement under law that the assessee should make a specific request to refer the matter to the valuation officer. 11. The ld. AR referred to the Calcutta High court in the case of Sunil Kumar Agarwal .v. CIT (2015) 372 ITR 83 (Cal) has held that in the case of the stamp duty valuation higher than the consideration received, the assessing officer must refer the matter to the valuation officer even if there is no request by the assessee. 12. She further submitted that the assessee along with his wife purchased a property on 31.07.2013 for ₹ 1,00,000,00 which is worth of ₹ 1,76,47,000. The AO added fifty percent of ₹ 38,23,500 in the hands of the assessee invoking the provisions of section 56(2) (vii) (b) which was confirmed by the CIT(A). 13. She submitted that the assessee plea is on three counts as follows:- i. The property purchased was under dispute and the assessee purchased with the condition that the assessee was liable to settle the tenant. ii. The excessive TDS was returned to the seller. iii. The assessing officer should have referred the property for valuation officer. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at No 507 to 514, 2nd Main Road, Malleshwaram, Bangalore, measuring around 1500 square feet along with 8 sq. building in the ground floor and 7 sq. building in the first floor. According to the assessee, he has paid a sum of ₹ 1 crore. However, as per sale deed copy, the value mentioned for stamp duty was ₹ 1,76,47,000. Since the property was purchased along with assessee s wife, Mrs. Rathna, the AO opined that the balance consideration of ₹ 76,47,000 is to be divided amongst these two assesses equally and an amount of ₹ 38,23,500 is to be taxed in the hands of the assessee u/s. 56(2)(vii) of the act. The assessee objected on the reason that due to some litigation problem, the assessee paid lesser value than disclosed in the sale deed. Further the assessee submitted copy of report from registered valuer, K. Narayana Prasad dated 1.6.2013 valuing the property at ₹ 93,27,450. It was also brought to the notice of the lower authorities that the said property was purchased at ₹ 1 crore instead of ₹ 1,76,47,000 on the reason that the said property was not vacant and under dispute at the time of purchase and litigation was pending vide F.D.P N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stamp valuation authority at ₹ 2,80,00,000/-, the Assessing Officer made addition of ₹ 1,02,50,000/- in the hands of the assessee by following the provisions of section 56(2) of the I.T. Act. We find, in appeal, the ld. CIT(A) deleted the addition, the reasons for which have already been reproduced in the preceding paragraph. It is the submission of the ld. DR that since the ld. CIT(A), instead of calling for a report from the DVO, had deleted the addition on the basis of submissions made by the assessee, therefore, the order of the ld. CIT(A) is not in accordance with law and the order of the ld. CIT(A) be reversed. In his alternate argument it is his submission that the matter should be restored to the file of the Assessing Officer. 15. It the submission of the ld. counsel for the assessee that when the assessee had furnished copy of the registered valuer and has also brought to the notice of the Assessing Officer during the assessment proceedings regarding the arbitrary adoption of circle rate by the stamp valuation authority, the Assessing Officer, instead of referring the matter to the DVO proceeded to make the addition on the basis of the valuation adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the properties is as under:- Sl. No. Address of property Area in sq.mtrs. Date of sale deed Value as per Circle rates (Rs.) Value as registered sale deed 1. 957, Sector G, Narela Indl. Complex, Delhi 350 Sq. Mtrs. 08-11-2015 3,58,57,500/- 70,00,000/- 2. 855, Block E, DSIDC Narela Indl. Area, Delhi 350 Sq. Mtrs 13-7-2013 2,80,00,000/- 90,00,000/- The copy of valuation report in respect of property No. 886, Block E, Narela Industrial Area, Delhi dated 7-6-2013 of Captain Suresh Dutt Associates also filed during the remand stage. The copies of letter by the Industrial Complex Welfare Association to the then Chief Minister of Delhi Smt. Sheila Dixit dated 9-12- 2010 and to Shri Arvind Kejriwal dated 30-1-2014,1, stating that the circle rates of industrial plots in Narela Industrial area are much higher than the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of appeal, before the CIT (Appeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact-finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority. For such purposes, we only need to point out one step in the procedure in appeal as prescribed in Section 250 of the Income-tax Act wherein, besides it being obligatory for the right of hearing to be afforded not only to the assessee but also the AO, the first appellate authority is given the liberty to make, or cause to be made, further inquiry , in terms of sub-section (4) which reads as under:- The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals). 39. The further inquiry envisaged under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a further inquiry in exercise of the power under section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. 43. In the result, the questions of law stand answered in favour of the Revenue though with a direction that the matter of assessment arising out of notice under section 148 Income-tax Act issued on 18-4-2007 for AY 2004-05 in respect of the assessee would stand remitted to the CIT (Appeals) for fresh consideration/adjudication in accordance with law. 18. However, the facts in the instant case are completely different. The Assessing Officer had not discussed anything about the valuation report filed by the assessee during the course of assessment proceedings. The representations filed by the trade organization before the then Chief Minister of Delhi about the arbitrary adoption of circle rate by the stamp valuation authority was also ignored by the Assessing Officer and instead of referring the matter to the DVO he made addition being the difference between the circle rate and actual sale consideration. When the assessee submitted various details including two sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other decisions cited by the Id. AR in this regard hereinabove. The first appellate order on the issue is thus upheld. The grounds are accordingly rejected. 5. In the result, appeal is dismissed. 20. Since the facts in the instant case are identical to the facts of the case decided by the Tribunal, therefore, respectfully following the same, we uphold the order of the ld. CIT(A) on this issue and the grounds raised by the Revenue are accordingly dismissed. 22. In the present case before us also, the AO completely ignored the valuation report of the registered valuer submitted by the assessee and submissions made thereon. The AO mechanically applied the provisions of section 56(2)(vii) to bring the difference of stamp duty valuation and actual sale consideration paid by the assessee, without making any efforts to find out the actual cost of property, when in fact the assessee stated that the property when purchased was under litigation and pending before the Civil Court, the AO was not bothered about these impediments and straightaway considered the stamp duty valuation for the purpose of making addition u/s. 56(2)(vii) of the Act. In such circumstances, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation Officer. Hon'ble Calcutta High Court, in the case of Sunil Kumar Agarwal v. CIT reported in 372 ITR 83 has clearly held that the AO, discharging quasi-judicial function, has the bounden duty to act fairly and to follow the course provided by law, which in that case, was the reference to the valuation officer. In the present case, in view of the assessee's specific dispute and claim before the AO that stamp valuation of the property sold was not its fair market value , it was the bounden duty of the AO to have made reference to the Valuation Officer which, for the reasons not borne on records, was not made. 10. Hon'ble Allahabad High Court in the case of CIT v. Chandra Narain Chaudhary in ITAT No. 287/2011 vide Judgment dated 29-8-2013 in a case, though having different facts where assessee therein had filed more than one valuation Report , in the context of section 50C of the Act, held that whenever objection is taken or claim is made before AO, that the value adopted or assessed or assessable by the Stamp Valuation Authority under sub-section (1) of Section 50-C exceeds the fair market value of the property on the date of transfer, the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the addition made by the AO cannot be approved. 13. Now, having held that since the AO failed to follow the procedure prescribed under the law and for this reason the addition cannot be held legally valid, the next question arises for consideration is whether the case be set aside to the AO for following the said procedure and then pass fresh order. 14. In this respect we state that though the powers of the Tribunal are wide enough but they should not be used to allow the department to make up its shortcomings, doing so would defeat the purpose of justice and fair play. Objection that the assessee did not request for making reference to the valuation cell, suffice would be to observe that assessee has no obligation to instruct the AO to follow the law. 15. Deciding similar issue, ITAT, Hyderabad in the case of ACIT v. Lalitha Karan , ITA No. 1130/Hyd/2015, order dated 04/01/2017 (copy placed in assessee's compilation on Pgs. 7 - 15) has observed in para 7.1 - when deeming provision was to be invoked, the same has to be construed strictly and it has to be taken to its logical conclusion i.e. upon not following the proper procedure prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the function of the Tribunal to allow further opportunity to the AO to cover up legal lapses made by him, by restoring the matter back to his file. Therefore, remand/setting aside order could not be made in this case to enable the AO to make up his earlier deficient work by initiating assessment proceedings for the third time after a lapse of considerable time. 17. In the case of Raj Kumar Jain , reported as 50 ITD 0001 (ITAT, Allahabad), Ch. G. Krishnamurthy, the then President of ITAT, as a Third Member also observed in para 5 as follows - The Tribunal acting as an appellate authority has to see whether the assessment framed by the Assessing Officer and whether the appellate order appealed against was according to law and properly framed on facts and whether there was sufficient material to support it. When there is no material to support it and when as observed by the learned Accountant Member the additions made by the Assessing Officer could not be sustained, it is not for the Tribunal to start investigations suo-moto and supply the evidence for the Department. If the additions are not supported by evidence, the only course open to the Tribunal is to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income. In light of the peculiar facts of this case and in the absence of the DVO report, we are of the considered opinion that the assessee cannot put to travel up facing virtual trial to appear before the AO after three years to prove that the sale consideration declared by him was reasonable. 20. In the present case, it is noted that neither the Assessing Officer nor the Ld. CIT(A) appreciated the contentions raised by the assessee while adopting the stamp duty value as fair market value of the property purchased nor referred the matter to the DVO as was required U/s 50C(2) of the Act. The AO has also not found or alleged with any corroborative material evidence that the assessee has paid any excess amount over the sale consideration mentioned in the sale deed. 21. Considering the factual Matrix and binding legal decisions, the findings of ld. the CIT(A) in confirming the addition made by the AO can not be approved. In our considered onion, the department cannot be allowed a second inning, by sending the matter back to AO, enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a re-trial for no fault of him and to again p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration was the fair market value of the property purchased by the assessee when the assessee was all along disputing valuation of the property and the revenue miserably failed to find out the correct value of the property both at assessment stage as well as at first appellate stage. The decisions referred to above squarely applies to the facts of the assessee's case. Thus in the facts and circumstances of the case and also in view of the above judicial pronouncements we direct the Assessing Officer to delete the addition made u/s. 56(2) of the Act. Ground No. 2 of grounds of appeal is allowed. 28 . Ld. Counsel for the assessee also made submissions with regard to additional ground raised i.e. provisions of section 56(2)( vii )( b ) does not apply to the property which is still under construction and made elaborate submissions on this. The Ld. Counsel for the assessee also made submissions that the addition was entirely made in the hands of the assessee though the flat was purchased by the assessee jointly with his wife. It is also argued that the Ld.CIT(A) erred in taking area of the flat at higher figure than the actual area of the flat in possession. Since we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al asset. However, it was also stated in the remand report that the gifted property at Jayanagar was still appearing in the balance sheet of the assessee as at 31/03/2014. In this regard, the assessee submitted that inadvertently, the gifted house property was not removed from the Balance sheet as at 31/03/2014. However, he filed copies of balance sheet as at 31/03/2015 and 31/03/2016 wherein the gifted property was not part of the balance sheet of the assessee. In this regard, the assessee also relied upon the decision of Supreme court in the case of Kedarnath Jute Mfg co. Ltd vs CIT 82 ITR 363 wherein it was held as under:- We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income Tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is clear from the sale deed that the new asset is at same premises bearing survey nos. 12/1 to 12/4 respectively. 34. It was also argued that the year under appeal is AY 2014-15 and the amendment to section 54F of the Act to invest in one residential house was with effect from AY 2015-16 onwards. The assessee relied upon the decisions of jurisdictional High Court in the case of CIT vs Rukminiamma, 331 ITR 211, Khoobchand M Makhija 43 taxmann.com143 wherein it was clearly stated that a residential house may include buildings or land appurtenant thereto and the letter a being an indefinite article should be read in consonance with the other words buildings and lands and therefore the singular a residential house also permits use of plural by virtue of section 13(2) of the General Clauses Act. The assessee also relied upon the order of co-ordinate bench of ITAT in the case of T.A.V Gupta ( page no. 300-305 of compilation of case laws) wherein relying upon the decision of Rukhminiamma and Khoobchand Makhija, the deduction u/s 54F of the Act was allowed with respect to 13 flats situated at same premises. Therefore it was submitted that the assessee s case is squarely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this order is passed for AY 2015- 16., i.e., post amendment to section 54F of the Act. 38. The ld. AR submitted that the above decisions are squarely applicable to the facts of the assessee s case, therefore the deduction u/s 54F of the Act may be allowed. 39. The assessee sold a commercial property along with his wife on 24.08.2013 for ₹ 7,02,90,000 and claimed deduction u/s 54. The assessee during the assessment proceeding as well as during appeal proceedings before CIT (A) (Page 11 of CIT (A) order) as well as during the hearing of Hon'ble ITAT on 21.102.2021 made it clear that the said property was commercial and hence deduction u/s 54 is not available. The AO in his order in page no 5 recorded his finding that the property sold was commercial property and denied deduction u/s 54. 40. The assessee made alternate claim u/s 54F. The assessing officer denied the claim on the ground that the assessee owned two residential properties on the date of transfer - one in Jaya Nagar and another one in Basavanagudi. 41. Before Ld. CIT (A) the assessee made submission that the property at Jayanagar was gifted to assessee's daughter on 25.07.2013 itself i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the said Partition Deed, the Office of the BBMP bifurcated the total property under the Special Notice No.DA(J)59/KTR/125/92-93; il/ITR 157/93-94 dt.13-12-1993 and assigned property numbers of them, No.258: 12:0 in respect of the FIRST VENDOR, No.258:12:02 in respect of the SECOND VENDOR, No.258:12:03 in respect of the THIRD VENDOR and No.258:12:04 in respect of the FOURTH VENDOR to the Schedule of the Properties Item No.1,2,3 4 respectively and mutated their names. v. The vendors got separate Khatas as evident from the followings (page 244 of PB 1): The BBMP issued separate Khata Certificates to each of the VENDORS herein vi. The vacant land belongs to one individual and house site belong to three other individuals as evident from the following (page 244 -245 of PB 1): 'presently, for the portion fallen to the share of the FIRST VENDOR namely Smt. D P Saroja Sri A P Varadaraj, the BBMP assigned New PID No.59- 111-12/1 and which is having 10 squares ground floor house (built in 1963-64). For the portion fallen to the share of the SECOND VENDOR namely, Smt. A P Gayathri, the BBMP assigned new PID No.59- 111-12/2 having a duplex house of 10 squares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gayathri All that piece and parcel of the residential property bearing New PID No.59-111-12/2 (Old No. 258:12:02), situated at S. Kariyappa Road, (previously Kanakapura Road), 7th Block, Jayanagar, Bangalore with bounder boundaries as under. East by: Property of Smt. D.P. Saroja and A.P. Varadaraj West by: Property of Smt. A.P. Sandhya North by: Property bearing Old No.259 with 9 common passage South by: Property of Smt. D.P. Sujatha and her children The site to has the following dimensions East to West : 30ft. North to South : 33 ft. (Area : 735+270=1005 Sq.ft (including 9ft. x 30 ft common passage) The property has a residential RCC duplex house of about 10 Squares having Red Oxide flooring, doors and window shutters and frames are made of Jungle wood. ITEM No.3 Property belonging to Smt. A.P. Bharathi All that piece and parcel of the property bearing New PID No.59- 111-12-4, (Old No.258:12:04), situated at S. Kariyappa Road, (previously Kanakapura Road), 7th Block, Jayanagar Old, Kanakapura Road, Bangalore, with boundaries as under: East by: Property No. 12/3 Smt. A.P.Sandhya West by: Main Road, North ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard both the parties. In the present case, the assessee along with his wife, Mrs. Rathna sold a property bearing No. No. 645, V Block, 11th Main Road, Jayanagar, Bangalore for a total consideration of ₹ 7,02,90,000 for which the share of assessee was 50%. The said property was a commercial property. The assessee claimed deduction u/s. 54F of the Act. The AO observed that the assessee is not entitled to deduction because he was having two residential properties in Jayanagar and Basavangudi, Bangalore. The contention of assessee is that he owned only one residential property situated in Basavangudi, Bangalore to avail deduction u/s. 54F. The assessee purchased a residential property on 4.9.2014 situated at S. Kariyappa Road, 7th Block, Jayanagar, Bangalore for a consideration of ₹ 3,58,82,500 within the due date for filing return u/s. 139(1) of the Act. The assessee s contention is that the property owned by the assessee at Jayanagar, Bangalore was gifted to his daughter Mrs. Rashmi on 27.5.2013 and assessee is no more owning that property and deduction u/s. 54F is to be granted. 48. The contention of the ld. DR is that the said property though gifted to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Smt.K.G.Rukminiamma reported in 331 ITR 221 (Kar.) In the case of K.G.Rukminiamma (supra) the assessee on a site measuring 30' x 110' had a residential premises. Under a joint development agreement the assessee gave that property to a builder for construction of residential units. Under the agreement, eight flats are to be put up in that property. Four flats representing 48% is the share of the assessee and the remaining 52% representing another four flats is the share of the builder. So the consideration for selling 52% of the site was four flats representing 48% of built up area and the four flats are situated in a residential building. The Hon ble Court held that the four flats constitute 'a residential house' for the purpose of deduction u/s 54 of the I.T.Act. In that view of the matter, the Hon ble Court concluded that the Tribunal as well as the appellate authority were justified in holding that there is no liability to pay Capital Gains tax as the case squarely falls under sec. 54 of the Income Tax Act, 1961. 9.1 The Hon'ble Madras High Court in the case of CIT Vs. Smt. V.R Karpagam reported in 373 ITR 127 (Mad.) on identical facts have decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 52. Further, in the case of Shri. Chandrashekar Veerabhadraiah v. ITO in ITA No.2293/Bang/2019 dated 07.12.2020, this Tribunal held as under:- 9. We have heard both the parties and perused the material on record. Section 54F of the Act reads as follows: 54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset); the capital gam shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new assets is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly requirement is that it should be for the residential use and not for commercial use. If there is nothing in this Section which requires that the residential house should be in built in a particular manner, it seems to us that the Income Tax Authorities cannot insist upon that requirement. A person may construct a house according to his plans, requirements and compulsions. A person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post retirement. One may build a house consisting of four bedrooms (all in same or in different floors) or in such a manner than an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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